Child's Other Income

[BillV]

Livestock association paid child for selling animal in auction sale. Issued 1099 MISC filling in Other Income block. Child's name and SSN were used. This is not investment income or interest or dividends. Where do we show this income on the parent's 1040?

[KBTS]

If child's name and SS# are on the 1099, it cannot go on the parent's return. It is not investment income so it does not qualify to be included on form 8814. You will have to determine if child is required to file a return.

[ChEAr$]

If child's name and SS# are on the 1099, it cannot go on the parent's return. It is not investment income so it does not qualify to be included on form 8814. You will have to determine if child is required to file a return.

Let's see what Jiggers has to say on this subject. He should be the expert by now. (grin

[Gary2]

I gather that it's common for farming families to give their kids some animals to care for, to enter into 4H contests, etc. So my guess is that the animal was a gift to the child, the child sold it at auction, and if the child has an overall filing requirement, it just goes on line 21 as other income.

[Jiggers]

Let's see what Jiggers has to say on this subject. He should be the expert by now. (grin

See IRS Pub 225, Farmer's Tax Guide. Page 73, top of middle column: 4-H Club or FFA project.

You show the income on the kid's 1040, line 21. And you can deduct the expenses on that line also. Just attach a statement.

The problem that I encounter is that the dad has been deducting all of the expenses for the animal during the year, so the kid has no expenses. The kid will just have income and no expenses, which still isn't bad, and not subject to SE taxes.

[Gary2]

See IRS Pub 225, Farmer's Tax Guide. Page 73, top of middle column: 4-H Club or FFA project.
The problem that I encounter is that the dad has been deducting all of the expenses for the animal during the year, so the kid has no expenses. The kid will just have income and no expenses, which still isn't bad, and not subject to SE taxes.

Are there any issues with regard to either the father taking expenses for an animal that presumably isn't his, or else for gifting the animal to the kid just prior to sale? I'd certainly hope not, given the state of family farming.

On the other hand, treating the expenses as a loan from the father, with the kid having to pay them back from the proceeds, would increase the educational value. I have no comment on what's required to do it this way for tax purposes.

[Jiggers]

Are there any issues with regard to either the father taking expenses for an animal that presumably isn't his, or else for gifting the animal to the kid just prior to sale? I'd certainly hope not, given the state of family farming.

On the other hand, treating the expenses as a loan from the father, with the kid having to pay them back from the proceeds, would increase the educational value. I have no comment on what's required to do it this way for tax purposes.

The problem I always see is that the kid's animal eats from the same feed as the dad's animals. There is no way to separate.

I try to get the parents to give the kid a gift of cash from the get-go, and let the child pay for the animal and all related expenses. Which is what the child is supposed to do, a learning experience. But you know parents.

If the parent gifts the animal and the feed and can give me the dollar amounts, I will reduce those expenses accordingly on the Schedule F for the dad.

Unfortunately, this is all after the fact.

I do like the fact that some of these auctions are issuing 1099's to the kids. Otherwise the parents teach them that since there is no 1099, then you don't have to report it. I don't know about this income unless they tell me.